U.S. stocks sank Thursday morning after higher U.S. inflation stoked expectations of more rate hikes that investors worry will chill economic growth.
Wall Street’s benchmark S&P 500 index was down 67 points, or 1.8%, to 3,734 as of 10:50 a.m. Thursday. The Dow dropped 566 points, or 1.8% to 30,206, and the tech-heavy Nasdaq fell 1.5%.
Investors worry aggressive action by the Fed and other central banks to cool inflation that is at four-decade highs might derail global growth.
“Growth fears are hitting the markets harder than inflation concerns,” Stephen Innes of SPI Asset Management said in a report.
On Wednesday, the S&P 500 lost 0.4%. The Dow fell 0.7% and the Nasdaq composite dropped 0.2%.
Traders expect another Fed rate hike this month, probably matching last month’s 0.75 percentage point rise, the biggest in 28 years and three times the usual margin.
Inflation hit 9.1% in June, highest rate in more than 40 yearsAs inflation spikes, Social Security cost-of-living bump could reach 10.5%, report saysRise in interest rates expected to slow down home sales: “The housing market is in a downturn right now”Bank stocks also took a beating on weak earnings reports. Profits at JPMorgan Chase fell by 28% in the second quarter, the bank reported Thursday, as it tries to navigate an economy that’s showing strength in many areas but losing steam among rising interest rates that hit consumers and businesses alike.
Bank stocks have been hit hard this year as investors have worried about the Federal Reserve putting the U.S. economy into recession to combat inflation. A recession would mean some Americans would lose jobs, and likely start falling behind on their loans. These fears have more than offset the higher revenues that banks have earned from higher interest rates.
Fed officials say a recession is possible but not certain. They point to a strong U.S. job market despite higher borrowing costs.
Taking a more critical stance, CEO Jamie Dimon said in a statement that while the U.S. economy is growing and the job market and consumer spending are solid, a number of factors “are very likely to have negative consequences on the global economy sometime down the road,” including shrinking consumer confidence and the Federal Reserve’s efforts to bring decades-high inflation under control.
Fed rate hikes forcing would-be home buyers out of the market 04:11 “The U.S. consumer is almost single-handedly keeping the global economy afloat,” said Andrew Hunter, senior U.S. economist at Capital Economics, in a research note in June. Recent consumer spending data suggests consumers have started cutting back their spending on goods and services. Experts said it could be one of the first signs that inflation might be too high.
Traders are looking ahead to the latest quarterly results from big U.S. companies in the next few weeks.
In energy markets, benchmark U.S. crude lost $1.26 to $95.04 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 46 cents to $96.30 on Wednesday. Brent crude, the price basis for international oil trading, retreated $1.06 to $98.51 per barrel in London. It added 8 cents the previous session to $99.57 a barrel.
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